Collateral Is Not Debt

 “Gold is money. Everything else is credit.” —J.P. Morgan

Last week, I had the opportunity to listen to a Steve St. Angelo interview, and it occurred to me that at some point in recent history, we edited reality and formed a new story that we then mistook for truth. Steve explained it something like this…

You walk into the bank with a new suit and shiny shoes…

“Hello. I’m here to request a loan for a million dollars.”

The banker says, “Great! What are you putting up for collateral?”

You reply, “Well, I’ve got a million dollars in debt contracts I can put up.”

The banker wrinkles his brow and nods, thinking. Then he picks up his phone and dials. “Hey Joe, you gotta come over here and talk to this customer that walked in. He wants to put up a million dollars in debt contracts as collateral for another million.”

You hear the sound of cackling coming through the speaker and the banker bursts out laughing. “Sorry…” he says, “Debt is not an acceptable form of collateral.”

“Wait a minute,” you say, shaking your head. “Aren’t big institutions putting up their U.S. Treasuries as collateral for loans?”

“Well, yes,” the banker replies.

“And those aren’t debt contracts?”

The banker purses his lips, puzzled.

Someone, somewhere, edited reality and the government’s debt became collateral. Was this a kind of brainwash performed by the blob on society? Like a scam? Or a pyramid scheme? Or did people just go mad? I don’t know the answer, but those who understand (i.e. the central banks) the natural consequences of accepting debt contracts as collateral are changing their dollars into gold, quietly, at a pace not seen before in U.S. history. If you’re expecting CNBC to make an announcement about gold, in front of their Bitcoin advertising contracts, you might want to rethink that logic.

Steve St. Angelo likens today’s investors to a giant moth being attracted to the financial flame in the sky; the flame being high interest rates on the USA’s debt contracts. “Moths go to a flame and they get burned out,” he said. What he’s suggesting is that debt contracts don’t have any real value, and he’s absolutely right. At $34.6 Trillion, with a trillion being added every one hundred days, it’s a high speed train heading straight for a steel wall.

We are bombarded by numbers, but here’s how you should understand a trillion. One trillion dollars, 1 followed by 12 zeros, or one million million, is a very big number. If you had spent a million dollars every single day since Jesus was born (738,485 days), you wouldn’t be at even $1 trillion. You’d be at around $738 billion. If you started counting now, one number per second, it would take you 32,000 years to reach the number 1 trillion. If you counted backwards, you’d be in the Ice Age. And again, we are now adding a trillion dollars every 100 days to the national debt, and letting in gobs of immigrants as if we were crazier than crazy. Let that soak in a minute. Now, is the debt an asset or a liability? If you’re telling me it’s an asset, or collateral, then what makes it so?

A ten-year bond needs ten years of economic activity to pay the bond back. That’s based on 10 years of future energy. Meanwhile, a gold bar is based on energy that was used in the past, at much cheaper prices than the present and future. The government creates credit to buy energy at higher costs in the future, while the gold miners make money that maintains its value against the future cost of energy. It’s all about energy, and nobody made this clearer than Michael C. Ruppert…

Inflation, which is the devaluation of currency against real goods and services, is the antithesis of gold. Steve St. Angelo simplified it even further… “Things you consume are going to inflate. Things you own are going to deflate,” he said. In other words, your dollar will buy less and less food, supplies, and energy, and you will no longer be able to preserve your wealth in real estate that is inflated by dollar debt. In other words, when everyone needs to sell because they don’t have money and can’t keep up with the expenses, the prices of real estate will plummet.

It’s a no-brainer, but we live in a physical economy, and we depend on physical things to survive. Collateral is therefore anything in shortage that people need to survive, and anything that will retain its value when debt-backed currencies and financial instruments are no longer working. If you can foresee the future based on certain parameters, then you can get yourself some good forms of collateral to barter with, when the SHTF. Just as sentiment fueled the growth of financial assets in a fiat-driven economy, it will also fuel the death of them, when inflation ravages people’s finances.

Unlike real estate, physical gold has no counterparty risk. It is the premier sovereign asset of the world’s nations. It is also a proxy for energy in global trade. You cannot eat gold, but gold will maintain its purchasing power against a shrinking supply of energy whose price has been artificially suppressed by money printing. Like a beach ball held under water, the cost of energy and everything else will soar when it is understood that the debt will never be repaid, and bond holders could lose everything. This is why central banks have been buying gold—it’s the death of currency—and unless it’s on your radar, you probably haven’t seen that gold is at record highs.

In the global economy, everything is connected. Nothing stands independently on its own. If you want to live independently from society, then you’ll go into the woods somewhere and survive like the deer and rabbits do. You’ll be like Grizzly Adams or Big Foot. The British Pound just traded at a 36-year low, and the Japanese Yen is losing stability. To intervene and support the Yen, the Japanese government will have to sell massive amounts of USD assets, which could crash U.S. stock and bond markets. Meanwhile, people are playing financial markets like a game of Candy Crush Saga, using digital candlestick charts. Something’s gonna give.

We have mistaken the story of credit for money. We have mistaken technology for energy. We have mistaken what is digital for physical. And we have mistaken artificial intelligence for human brains. How did this happen to us? It’s the greatest mystery of humankind, but it’s an old story: love of wealth and power. The good news is the end of this cycle, and the birth of a new one, will bring lots of positive change. This is an opportunity for those who can see reality through all the editing. Figure it out and do something about it, before its too late. Collateral is not debt; it is gold (the wealth of nations) and silver (poor man’s gold), which doesn’t burn and lasts forever. The smart money knows it and owns it. It’s better to be years early than one minute too late.

 

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